More Retail Closures are Coming

Retailers are bracing for a fresh wave of store closures in 2018 that’s expected to eclipse the rash of closures that rocked the industry last year.

“Landlords are panicking,” said Larry Perkins, CEO and founder of the advisory firm SierraConstellation Partners. “The last year was pretty apocalyptic from a retail standpoint, and the macro issues haven’t changed. There will continue to be a high degree of bankruptcies and store closures.”

2017 was a record year for both store closures and retail bankruptcies.

Dozens of retailers including Macy’s, Sears, and JCPenney shuttered an estimated total of 9,000 stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy over the course of the year.

But there’s still a glut of retail space in the US, and the fallout is far from over.

The number of store closures in the US is expected to jump at least 33% to more than 12,000 in 2018, and another 25 major retailers could file for bankruptcy next year, according to estimates by the commercial real estate firm Cushman & Wakefield.

Nearly two dozen major chains including Walgreens, Gap, and Gymboree have already announced plans to close more than 3,600 stores next year.

Many more announcements on closures and bankruptcies are expected in the coming months.

The start of the year is a popular time to announce store closures and bankruptcies because retailers are typically flush with cash after the busy holiday season — and closing stores and filing for bankruptcy are costly.

The loss of even one anchor tenant can trigger a decades-long downward spiral for mall owners.

That’s because the malls don’t only lose the income and shopper traffic from that store’s business. The closure often triggers co-tenancy clauses that allow the remaining mall tenants to exercise their right to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the vacant anchor space.

That’s good news for retailers looking to grow their physical assets — it means they are more likely to score low rent and favorable lease terms.

But it’s terrible news for retail landlords, some of whom are now trying to stop the bleeding by suing the companies that are closing stores.

Search for Listings

Search by Keyword

INFORM

V/t Commercial is an experienced team of successful Vermont commercial real estate & business brokerage professionals. Established in 1986, and located in the heart of Burlington, Vermont, V/t Commercial brokers bring a disciplined and thorough approach to real estate and business transactions. V/t Commercial services include Tenant Representation, Landlord Representation, Corporate Representation, Commercial & Investment Real Estate Sales, and Business Brokerage. Learn More